EUR/USD: Bulls Rule On Higher Yield Spread, Low Italian Premium

The EUR/USD looks set to encounter a fairly constructive environment to extend gains following the rise in the German vs US yield spread coupled with a significant reduction in the Italian bond premium. The close at 5pm NY near the high of the day is another clue that longs may remain committed to carrying positions into the next area of liquidity at 1.1720.

The failure to crack the 1.1610 support area keeps the bullish structure intact, with last Friday's downward velocity in the pair's decline countered-attack by a push of similar impulsiveness. The bulls will most likely be fixated in an upward target of 1.1720 to complete a new cycle high, which at this point, looks increasingly likely to be achieved, barring any major setback in sentiment that leads to major USD strength.

Note, if the pair keeps making higher highs but the correlated instruments turn around, sellers may start to lurk around looking for selling opportunities. One can find out more on how to exploit divergences in the linked video.